The Cost of Over-Managing

Updated on: July 29, 2010 / 1:41 PM
/ MoneyWatch

By Caitlin Elsaesser
Shelly Sun, a self-proclaimed workaholic, wanted nothing more than to boost the number of her company's franchises. As founder and CEO of BrightStar, a Chicago-based home-care company, she pushed for rapid ramp-up -- and got it. The company, which started franchising in 2005, grew from 71 offices nationwide in 2008 to 131 in 2009.

With revenues up and expansion plans proceeding on pace, Sun figured everything was rosy. Then the company did its six-month franchise satisfaction survey at the end of 2009 -- and got a D rating. Sun, who was used to straight A's, couldn't believe what she was reading. "I shed a lot of tears when I read those results," she says.

Sun took the news as an opportunity to reevaluate her priorities and make some changes. Her moves seem to be working: Not only is the company on pace to bring in twice last year's revenues, but the latest franchise surveys came back overwhelmingly positive.

A philosophy of expansion
BrightStar franchisees provide supplemental healthcare professionals for a wide range of medical facilities, as well as nurses and caregivers for private duty in-home care case for people of all ages. The corporate office provides training, placement assistance and support to the franchisees, and receives a small percentage of revenues in return. "I have a very close relationship with my franchisees," Sun says. "I look at them as customers."

So when Sun received her near-failing grade, she felt shocked and hurt. The six months leading up to the survey had been the company's most successful in terms of revenue, and the money was all reinvested in new personnel and programs to support franchisees, so she assumed the results would be positive. Instead, franchisees told her they felt overwhelmed and that the major new programs helped new owners rather than them.

"At first I thought, how much more can the franchisees ask of me when I'm already working 90 hours a week?" she says. "At times I put them ahead of my husband and kids." Furthermore, Sun didn't think the company could afford to invest more money in helping the franchisees.

Back to the drawing board
Sun approached BrightStar's franchise advisory council, a representative group of franchisees. She worked with them over the course of a month to develop a clearer picture of what the respondents wanted -- and what she had been doing wrong.

The board told her that corporate would be better off taking on less initiatives and focusing more on projects that would be hugely impactful on the system -- take on 60 initiatives and push them to 100% adoption and success, instead of doing 100 initiatives and only getting them to 60% adoption and success. The franchise board helped Sun to understand that "perfect" was becoming the enemy of good. "I realized that new initiatives can keep a franchise owner from focusing on what's most important: running the business," says Sun. "I had to learn to let go of every little process -- to say that good enough is good enough, and focus on a few of the most critical issues."

Now, instead of pushing out multiple initiatives each week, BrightStar concentrates on longer-term initiatives that will make business easier for its franchisees -- like improving the technology its offices use.

Sun also reached out to external mentors to help sort through internal business problems. "As a business owner, I often can't talk about problems with employees or stakeholders," she says. Sun has four mentors who run large-scale franchising companies. One, who owns nine McDonald's franchises, exhorted her to see things from the franchise owner's point of view -- and helped her understand that too much "help" from headquarters can cripple on-the-ground operations.

The rewards of listening
The approach has paid off. BrightStar was expanding fast before Sun changed her tactics with franchisees -- revenue grew from $24 million in 2008 to $51 million in 2009. But growth has accelerated in 2010: The company is on track to bring in $115 million this year.

The past year was painful, but Sun learned some critical lessons. In particular, her experience reinforced the value of soliciting feedback from franchisees. "Thank God we do these surveys," she says. "Otherwise I wouldn't have realized how unhappy our existing franchise base was, and we never would have made the changes we did."
She also learned about the importance of communicating company goals with franchisees, who didn't understand that faster growth meant not just greater profit for Sun, but better name recognition for local offices, and an ability to reinvest in them through technology and marketing program improvements.

In fact, better name recognition is exactly what Sun is shooting for. Sun, who currently has 140 franchises, wants her company in every state, and has plans to expand internationally as well. "If we stopped where we are, not everyone in the country would know about BrightStar," she says. "I want us to be in every city, and on every billboard."

Shelly Sun founded BrightStar with her husband in 2002. In February, she was named Entrepreneur of the Year by the International Franchise Association.Resources: